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Rating Action:

Moody's assigns Ba1 rating to Spirit Aerosystems' $1.2 Billion Credit Facilities, Outlook to Positive

30 Mar 2012

New York, March 30, 2012 -- Moody's Investors Service ("Moody's") assigned a Ba1 rating to Spirit Aerosystems, Inc's ("Spirit") senior secured $1.2 billion bank credit facilities, consisting of a $650 million Revolving Credit Facility due in April 2017 and a $550 million Term Loan Facility due in April 2019 (collectively, the "Credit Facilities"). The Credit Facilities will replace Spirit's existing Term Loan B and $650 million Revolving Credit Facilities, extending the maturity dates and lowering pricing. Separately, Moody's affirmed Spirit's Ba2 Corporate Family and Probability of Default ratings, and changed the rating outlook to positive from stable. The positive outlook reflects Moody's belief that Spirit's favorable earnings and cash flow profile over the intermediate term should sustain recent improvements to key credit metrics. Moody's also assigned a Speculative Grade Liquidity Assessment of SGL-2, indicating a near term good liquidity profile.

Rating Assignments:

....$650 Million Senior Secured Revolving Credit Facility due in May 2017, Rated Ba1 (LGD2, 27%)

....$550 Million Senior Secured Term Loan Facility due in May 2019, Rated Ba1 (LGD2, 27%)

Rating Affirmations:

..Issuer: Spirit Aerosystems, Inc.

.... Corporate Family Rating/Probability of Default Rating, Affirmed at Ba2

LGD Assessment Changes:

....Senior Unsecured Notes, Ba3 (LGD5, 83%) from Ba3 (LGD5, 81%)

Outlook

..... Changed to Positive from Stable

Speculative Grade Liquidity Assessment

..... Assigned SGL-2

RATINGS RATIONALE

The Ba2 Corporate Family rating reflects Spirit's leading position as a tier one supplier in the aerostructures market, operating margins approaching the high single-digit level and credit metrics (Debt to EBITDA of 2.9 times, EBIT to Interest of 3.5 times on a Moody's adjusted basis) that are strong for the rating category. The rating also is supported by Spirit's content on a diverse set of commercial and military aerospace platforms from Boeing, Airbus, Gulfstream and others - although Moody's notes that Boeing is more than 80% of total revenues. Spirit's earnings and cash flow profile should benefit over the intermediate term by production rate increases announced by the commercial airplane manufacturers. Longer term, strong commercial aircraft production should position Spirit to generate substantial free cash flow and to reduce leverage. The rating however continues to reflect the cyclicality of the commercial aerospace industry, the dependence on Boeing's production rate, and the requirement of significant up-front investment costs in development of new programs. Moody's notes that Spirit's revenues will be enhanced longer-term by Boeing's decision to re-engine the B737 (called the B737 MAX), because Spirit will have the majority of the airframe content on the B737 MAX.

Spirit is a major supplier to Boeing's B787 Dreamliner, which is now ramping production rates (scheduled to be 10 per month by early 2014, from 3.5 per month now). Spirit has satisfied its $396 million advance payment obligation to Boeing, repayment for which was applied against the first 50 B787 shipsets, and the remaining $700 million advance from Boeing will be repaid more gradually over the first 1,000 units delivered. This should support enhanced cash flow levels over the intermediate term. Moody's believes Spirit will generate modest free cash flow in Fiscal 2012, partially because inventories on the B787 and other commercial programs should be converted to cash -- reversing several years of cash outflow due to the build-up of inventory. Spirit's ability to earn a profit on the B787 program will increasingly depend upon its ability to enact cost reductions over time, and Moody's believes the company could be well positioned to do so as it progresses down the learning curve on this complex production process.

The SGL-2 speculative grade liquidity assessment reflects Spirit Aerosystems' good liquidity profile, with the expectation of positive free cash flow as well as suitable availability under the $650 million revolving credit facility (which has been utilized for working capital needs). The re-financing will result in a $550 million term loan maturing in April 2019 and a $650 million revolving credit facility maturing in April 2017, thereby effecting a very favorable maturity profile (no meaningful debt maturities until 2017). Moody's anticipates that Spirit Aerosystems will maintain adequate cushion under the Credit Facilities' financial covenants (Total Leverage Ratio no greater than 4.0, Covenant Leverage Ratio no greater than 2.75 times, Interest Coverage Ratio no less than 4.0 times).

The positive outlook reflects Moody's belief that Spirit's prospective earnings and cash flow growth, combined with a large order backlog, should continue the improving trajectory of credit metrics. The rating could improve if the company demonstrates sustainable positive free cash flow generation with improving credit metrics such as Debt-to-EBITDA approaching 2 times and Free Cash Flow-to-Debt above 10%; evidences successful execution on new platform development and maintains a strong order backlog. The ratings and outlook could be pressured down if Spirit is unable to sustain solid free cash flow as production of B787 ramps up to Boeing's target production rates, including consistent progress to Free Cash Flow-to-Debt of 10% and operating margins sustained below 6%, or if its liquidity profile weakened for any reason.

The principal methodology used in rating Spirit Aerosystems was the Global Aerospace and Defense Industry Methodology published in June 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Spirit AeroSystems, Inc., headquartered in Wichita, KS and formerly a division of Boeing Company, is one of the largest independent non-OEM designers and Tier-1 manufacturers of commercial aircraft aerostructures in the world. Components include fuselages, pylons, struts, nacelles, thrust reversers, and wing assemblies, primarily for Boeing but also for Airbus, Gulfstream and others. Revenues approximated $4.9 billion for the twelve months to December 31, 2011.

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

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Andris G. Kalnins
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Michael J. Mulvaney
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's assigns Ba1 rating to Spirit Aerosystems' $1.2 Billion Credit Facilities, Outlook to Positive
No Related Data.
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